Britain's economy will expand at a sharply lower pace in 2011 and 2012, growing by 0.7 percent this year and 0.6 percent next year, the European Commission said on Thursday. A previous EU forecast had foreseen growth of 1.7 percent in 2011 and 2.1 percent in 2012.
"The slowdown which began at the end of 2010 now looks more like a prolonged soft patch than a simple weather-related blip," the commission said in its fall European Union economic forecast. "Risks from the euro area sovereign-debt markets and the banking sector heighten this uncertainty. As such a contraction in GDP in at least one of the next few quarters cannot be ruled out," the report said.
But the outlook for corporate investment and net exports appears "positive enough" to justify a forecast of "modest" growth in 2011 and 2012, with the economy expanding by 1.5 percent in 2013, it said. Much of Britain's weakness can be attributed to shrinking household consumption, which has contracted for four quarters in a row, the commission said. The eurozone's debt crisis is also affecting Britain's prospects. "Weakness in the euro area, the UK's main export market, will hold back external demand at least in the short term," the report said.
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